The Ministry of Corporate Affairs clarified on Friday that while contributions made to the ‘PM CARES Fund’ shall qualify as Corporate Social Responsibility (CSR) expenditure, donations made to the ‘Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19’ do not.
“‘Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19’ is not included in Schedule VII of the Companies Act, 2013 and therefore any contribution to such funds shall not qualify as admissible CSR expenditure,” the ministry said in a clarification.
According to the Companies Act, companies that have a net worth of at least Rs 500 crore or revenue of Rs 1,000 crore or a net profit of Rs 5 crore are mandated to spend at least 2% of their net profit on CSR. Moreover, contributions made to the PM CARES Fund would qualify for 80G exemption under the Income Tax Act, 1961 (I-T Act), which means that these contributions are not taxable.
The ministry also clarified that contribution made to State Disaster Management Authority to combat COVID-19 shall qualify as CSR expenditure.
The clarification from the ministry comes at a time when there is a debate on whether the PM CARES Fund should get donations as opposed to the CM Relief Fund. So far, there has been no information on where the donations from the PM CARES Fund have been used, and if or not audited, whether accounts of the funds will be given.
The PM Citizen Assistance and Relief in Emergency Situations (CARES) Fund was created by Prime Minister Narendra Modi on March 28 so individuals and corporations can donate to the relief efforts against the COVID-19 pandemic.
Several state-level ministers such as Kerala Finance Minister Thomas Isaac have been of the opinion that the money should go to the state government since they are the ones implementing most of the relief measures. “Even by the end of March, Centre was not kind enough to provide any additional fund [for expenditure related to COVID-19]. Hence, in this context, the voluntary contribution of the people is very much required and I am appealing to them to contribute to the CM relief fund. Otherwise we don't have any objection to anyone contributing to the PM Fund,” the minister had told TNM in an exclusive conversation.
There has also been criticism over the transparency and accountability of the PM CARES Fund. Many, including the Congress part have questioned the need to create the fund and have suggested that it be merged with the PMNRF, which already has a balance of Rs 3,800 crore.
Recently, Congress president Sonia Gandhi wrote to PM Modi calling for all the money under the PM CARES Fund to be transferred to the Prime Minister’s National Relief Fund (PMNRF) to ensure efficiency, transparency and accountability.
In her letter on April 7, she said, “This will ensure efficiency, transparency, accountability and audit in the manner in which these funds are allocated and spent. It seems like a waste of effort and resources to have and create two separate entities for the distribution of funds. I understand that Rs 3800 crore approximately are lying unutilised in the PMNRF (at the end of FY-2019). These funds, plus the amount in PM CARES fund, can be utilised to ensure an immediate food security net for those at the very margins of society.”
In fact, the Ministry of Corporate Affairs has also ‘appealed’ to companies to generously contribute the PM CARES Fund over and above the minimum prescribed amount, which, it says ‘can later be offset against the CSR obligation arising in subsequent years’.
Over the past two weeks, the PM CARES Fund saw massive donations pouring in from companies, celebrities and individuals. Some of the country’s largest business conglomerates too have donated huge amounts. Reliance Industries has donated Rs 500 crore to the fund, SBI and its employees committed Rs 100 crore, NRI billionaire Lakshmi N Mittal announced a contribution of Rs 100 crore, among others.